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Canadian Wheat Farmers Facing Uphill Struggle : Bystanders but Victims in Agricultural Trade War Between U.S. and Europe

June 02, 1986|KENNETH FREED | Times Staff Writer

REGINA, Canada — Every spring, Canada's western farmers take a deep breath, cast a worried glance at the sky and plant their land in wheat. In some years, their harvest brings them thousands of dollars, but often what they reap is despair.

For this is the Saskatchewan prairie, a land where there is plenty of room to look but nothing much to see, an expanse of varying shades of brown as often covered with grasshoppers or cracked open by drought as it is crowned by the grain known as prairie gold.

Harsh and unforgiving conditions are part of every farmer's life, here and elsewhere in the world. Nature is both enemy and ally, and the successful farmer learns to live with it.

But this year has brought new and strange elements that threaten to do what insects and flood and drought have not been able to do--drive Canadians from the land.

According to experts, up to one-quarter of Canada's 140,000 grain growers will be out of business in the next two years, and that is a conservative estimate. Even those who survive will make no profit in that time.

Caught in the Middle

"The plate isn't very full," said Roy Cusitar, first vice president of the United Grain Growers in Winnipeg.

The irony and the frustration of these new obstacles are that they come from unsuspecting quarters that do not intend Canadians any harm.

Canada's grain farmers are caught in the middle of an agricultural trade war between the United States and the European Economic Community. And as with innocent bystanders in any war, Canada suffers the most and is virtually helpless to fight back.

The base problem is surplus. For six straight years, world wheat production has surpassed consumption, leaving about 148 million tons of wheat left over, two-thirds of it held by the United States.

In addition, the Americans have seen their share of the world's wheat market decline from 47% to about 25% since 1981. This has been due partly to the strong U.S. dollar but also to aggressive marketing by the EEC, which has transformed itself from an importer into a major exporter, largely by paying huge subsidies to its farmers.

The U.S. Congress answered the European challenge last fall with a five-year farm bill that aims to reduce surpluses and reclaim markets by forcing the price of wheat down by 27% to a modern record low $2.40 a bushel. But, as a cushion, the American government will pay U.S. farmers a subsidy of $1.98 a bushel, making the price to the farmer $4.38.

The EEC has approved subsidies that guarantee its European wheat growers $4.77 a bushel.

In order to keep Canadian wheat competitive in the world market, the Canadian Wheat Board, which buys nearly all of the wheat grown in Canada, set the price as of next Aug. 1 at $2.54 a bushel, including some minor subsidies. This represents a decline of 20%, and it leaves the American and EEC farmers with a subsidy-induced profit, while the Canadian farmer is guaranteed a loss.

Hugh Campbell, who farms 1,500 acres near Regina, said recently: "I'll get just over $2.50 a bushel, but it will cost me more than $3 to plant. I have to lose."

Campbell, who has non-farm income and approaches farming as an industrial business, says he can survive. "I'll develop some alternate crops and try to cut my costs," he said. "And I don't owe any money."

Heavy Debt Load

That may be true of Campbell--and, according to bank figures, about a third of all Canadian wheat farmers--but for the rest, the low price is an added burden to a heavy debt load.

John Murphy, vice president of the Royal Bank's Regina operation, said in an interview that so far only 5% of Saskatchewan's 14,000 farm families are behind in payments.

But fully a third will not be able to keep up over the next two years, he said, and another third are in serious danger of falling behind, unable to borrow more money and faced with no way of buying seed or even maintaining equipment.

For these troubled farmers, the problems caused by the United States and the EEC are the least of their worries. They are in trouble because they misjudged their business.

A farmer near Moose Jaw, who asked to be identified only as Jim because he is embarrassed by his situation, said: "I was raised on a farm, but I went to college, and I decided that I wanted the life of the city, and I got a job in Toronto in insurance. That was OK, but I missed the farm, and when my dad started making money in the late '70s, I decided to go back. I got some easy loans and bought my dad out and expanded the place (from 900 to 2,000 acres).

Millionaire, on Paper

"At the time, it seemed easy. I paid $800 an acre and the interest rates were high, but we were having bumper crops and land went up to $1,000. I was getting 40 bushels and more an acre. I was a millionaire, on paper."

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